On
January 1, Congress allowed two tax breaks that benefit the wealthy to
become effective. The cuts eliminated current provisions of the tax code
that limits the amount of personal exemptions and itemized deductions that
Americans with high incomes can take. Over the course of the next five
years the tax cuts will cost approximately $27 billion, according to a
study by the Center on Budget and Policy Priorities. Ironically,
Republicans in Congress, only two weeks before the cuts took effect, voted
to reduce domestic spending on programs affecting the poor and the middle
class by $39 billion over the next five years.

The tax codes
eliminated are the Pease provision and the personal exemption phase-out
provision (PEP). Both were originally passed in 1990 in an effort to
reduce the deficit. The Pease provision limited the amount of itemized
deductions taxpayers with high incomes could claim. The tax code permits
individuals to reduce their taxable income either by the standard
deduction or by an amount equivalent to their total itemized deductions.
In general, wealthy taxpayers use itemized deductions much more than the
middle class and the poor.

The Pease provision
reduced the amount of deductions for those who itemized and had incomes
exceeding $145,950 last year. The total amount of itemized deductions
wealthy taxpayers could claim was reduced by three percent of the amount
by which their incomes exceeded $145,950. Similarly, the PEP provision of
the tax code phased out personal exemptions for the wealthy. The tax code
permits individuals to claim a personal exemption for each member of their
household; last year it was $3,200.00.

They can subtract
personal exemptions from their adjusted gross income before calculating
their taxes, thereby reducing the amount of taxes owed. In 2005 the PEP
provision mandated that taxpayers lost two percent of their personal
exemption for every $2,500.00 by which their income exceeded $218,950 for
married couples and $145,950 for singles.

Congressional
Republicans have frequently said that the Pease and PEP provisions made it
more difficult for Americans to determine their taxes. However, it’s
typically high-income taxpayers who take itemized deductions. And these
are individuals who usually have their taxes prepared by accountants and
other tax professionals who can easily calculate these provisions.

The Joint Committee
on Taxation has estimated that over the next 13 years these tax breaks for
the wealthy will deprive the country of $197 billion in revenue. And a
study by the Brookings Institution determined that 97 percent of the Pease
and PEP tax breaks will go to those households with incomes above
$200,000. And more than half of these breaks will benefit the 0.2 percent
of families with annual incomes exceeding $1 million. Once these tax cuts
are fully implemented in 2010, the average millionaire will save $19,000
annually in taxes.

Only three percent
of families with annual incomes of less than $200,000 will receive any
benefit from these tax breaks. Families with yearly incomes between
$100,000 and $200,000 will receive an average tax cut of only $25. And
families earning less than $100,000 -- the vast majority of Americans --
will not benefit at all.

Shortly before these
tax cuts became effective Republicans in Congress approved of massive and
draconian domestic budget cuts, despite objections by Democrats.
Republicans insisted that “tough choices” had to be made in an effort to
reduce the growing deficit. Consequently, they voted to cut $11 billion
over the next five years from Medicaid, the health care system that serves
America’s poor. Substantial reductions were also made in childcare
assistance, which will result in 255,000 fewer children living in poverty
receiving federal assistance.

Republicans voted to
cut funding for child support enforcement programs by $1.5 billion over
the next five years. These funds are used to locate parents who have
failed to pay child support and collect delinquent payments on their
child’s behalf. According to the Congressional Budget Office, this loss of
federal funding will result in $2.9 billion in child support going
uncollected in the next five years.

Other cuts were
equally severe. Congressional Republicans agreed to cut $343 million in
funding for foster care programs, including reductions that will make it
more difficult for grandparents who are raising their grandchildren to
receive assistance. Over $12 billion was cut from federal college loan
programs, making it more difficult for poor and middle-class Americans to
afford a college education.

If Republicans had
chosen not to allow the Pease and PEP tax cuts to take effect this would
have saved more than two-thirds of the funding cut from domestic programs.
In fact, over the next five years these tax breaks exceed the savings from
all of the reductions in low-income assistance programs that Congress
voted to cut. It appears that for Congressional Republicans, “tough
choices” in reducing the deficit didn’t include requiring the wealthy to
continue to pay their fair share of taxes.

Gene C. Gerard
has taught history, religion, and ethics for 14 years at several colleges
in the Southwest, and is a contributing author to the forthcoming book
Americans at War, by Greenwood Press. He writes a blog for the world
news web site OrbStandard at:www.orbstandard.com/GGerard.